Damora Therapeutics, Inc. Income Taxes Disclosure

14. INCOME TAXES

As further described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:

The Company had income tax expense of approximately $50,000 and $41,000 for the year ended December 31, 2025 and 2024, respectively. The Company has incurred net operating losses for all the periods presented. The Company has not reflected the benefit of any such net operating loss carryforwards in the accompanying financial statements. In 2019, the domicile of the reporting entity has changed from Denmark to the United States resulting in a tax rate of 21% in 2025 and 2024. This is discussed further below.

Deferred taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The principal components of the Company’s deferred tax assets and liabilities consisted of the following (in thousands):

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more-likely-than-not able to be realized. Based upon the Company’s assessment of all available evidence, including the previous three years of taxable income and loss after permanent items, estimates of future profitability, the Company’s overall prospects of future business and pursuant to the pursuit of strategic alternatives, the Company determined that it is more-likely-than-not that the Company will not be able to realize a portion of the deferred tax assets in the future. The Company will continue to assess the potential realization of deferred tax assets on an annual basis, or an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to change the valuation allowance against the gross deferred tax assets. On the basis of this evaluation, a full valuation allowance at December 31, 2025 and December 31, 2024 was recorded of $75.4 million and $67.2 million, respectively, to reduce the net deferred tax assets to their estimated realizable value. The change in valuation allowance was $8.2 million.

The Company is subject to taxation in the United States, United Kingdom and Denmark. As of December 31, 2025, tax years 2019 and forward were generally open to examination by the United States and foreign tax authorities. There Company is not under examination by any taxing authorities.

As of December 31, 2025, the Company had gross U.S. federal net operating losses (“NOLs”) of $65.6 million and federal research and development credits (“R&D credits”) of $1.2 million and Orphan Drug Credit (“ODC”) of $9.0 million to offset tax liabilities. The federal R&D credit and ODC carryforwards begin to expire in 2033 and 2042, respectively. All of the federal NOLs have an infinite life. The Company also had gross state NOLs of $57.0 million, which are available to offset state tax liabilities. The state NOLs begin to expire in 2040. The Company also had NOLs in Denmark of $208.2 million which have an indefinite life. Federal and state NOLs and R&D credit and ODC carryforwards are also subject to annual limitations in the event that cumulative changes in the ownership interests of significant stockholders exceed 50% over a three-year period, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986 (the “Code”). The Company has not completed an analysis to determine if the NOLs and R&D credits are limited due to a change in ownership.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, reinstating full expensing of domestic R&D expenditures

under new Internal Revenue Code Section 174A, effective for tax years beginning after December 31, 2024. The legislation also provides taxpayers with the option to accelerate deductions for unamortized domestic R&D costs incurred during the 2022 to 2024 period. The Company intends to elect full expensing of 2025 costs and acceleration of prior-year unamortized costs in its 2025 tax return. As a result, the Company recorded a $0.03 million reduction in deferred tax liabilities in the year ended December 31, 2025. Final elections will be made with the 2025 tax return filing.

The Company recognizes accrued interest related to unrecognized tax benefits and penalties as income tax expense. The Company does not have any material unrecognized tax benefits which would affect the effective tax rate if recognized. The Company does not have any unrecognized tax benefits which would reverse within the next twelve months.

The Company is eligible for the Danish enhanced research and development tax allowance, providing for an increase in the deductible value of the amount of certain R&D expenditures. The deduction for R&D expenditures is set at 101.5% for 2019, 130% for 2020 through 2022, 108% for 2023 through 2025 and 114% for 2026.

The Company has qualified for the R&D Expenditure Credit (“RDEC”) in United Kingdom for preclinical laboratory and in-patient clinical trials. The RDEC net tax benefit is reported as a reduction to research and development expense in the consolidated statements of operations. For the year ended December 31, 2024, the Company recorded an overall reduction for the RDEC, net of the UK corporation tax rate of $0.06 million. The amount recorded as of December 31, 2024 includes relief for the tax years December 31, 2021 through December 31, 2024. The Company recorded no RDEC amount for the year ending December 31, 2025.